In its drive towards greater disclosure in the markets and immediate dissemination of price-sensitive information, the secondary market advisory committee of the Securities and Exchange Board of India on Thursday mandated a detailed format for companies to report significant changes in their shareholding pattern.
Pointing out that the shareholding pattern of Indian companies had become much more complex in recent years, with the entry of new investment entities, the committee said a detailed format with standarised nomenclature was called for as "ambiguous information on the shareholding pattern affects price discovery in the secondary market. Moreover, research and policies too get vitiated."
Among other things, the new format replaces the term "promoter holdings" with "holdings of the controlling group".
This will, at one stroke, bring into the open the total stake that is, in effect, under the control of the promoter group, and will impact promoters who control companies through nominal shareholdings in their own name but significant stakes through trusts and other legal entities.
Those who hold a controlling or strategic interest will have to be individually listed, while the in the case of public holders only those holding 1 per cent and above would need to be listed. Every single beneficial owner of ADRs, GDRs and other foreign securities has to be listed.
Further, companies are required to file their shareholding patterns within two days of any change of one per cent or more in the stakes of any entity in the controlling or strategic holdings group. At present, this information is disseminated through a brief notice to the stock exchanges.
The revised format also says that if there is any shareholder related to the holders of a controlling or strategic interest, "then its shareholding should not be put under public or free-float, but be included in the controlling or strategic interest section."
The committee has expanded on the term `controlling interest and strategic holding or in-concert holding' to mean entities that are in control of the company, directly or indirectly, whether as a shareholder (including a shareholding of 10 per cent or more in such companies), director or otherwise.
Control has been defined as the "right to appoint majority of the directors or to control the management or policy decisions."
Broadly, the holdings would be categorised under total controlling, strategic, in-concert holdings, total free-float or public holdings, total domestic holding (this would be the sum of all domestic entities whether exercising control or not) and total foreign holding.
New format
- The term 'promoter holdings' has been replaced with 'holdings of the controlling group'.
- Promoters holding a controlling or strategic interest will have to be individually listed.
- Every single beneficial owner of ADRs, GDRs and other foreign securities has to be listed.
